Music profits swirling down digital drain

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Music profits swirling down digital drain

Everyone said it was a smash hit. Singer Kim Tae-uk’s new release last April, “Dambaekhara,” seemed to be on every TV channel, and the music video was the talk of the town.
The problem, however, was that people only seemed to be listening on free music Web sites, and on television.
In five months, album sales haven’t exceeded 10,000 copies. Earnings from Internet and mobile phone services have been less than 10 million won ($8,300).
“I’ve been in the local music industry for 10 years by now, and I was pretty confident that this one would be a success,” said Kang Tae-gyu, head of Farm Entertainment, the agency that released the album. “But I was totally mistaken. I expected that if we made good music, it’d lead to good income. If album sales would not work, I saw hope in royalties. Now I see, however, that I was wrong.”
The total cost of releasing an album, including production and marketing, runs from 300 to 400 million won, according to Mr. Kang. These days, he says, it’s hard to get a return of even 100 million won, even for albums made by established musicians.
“We’re about to be standing on heaps of debt,” Mr. Kang said.

Some people say the industry has had it coming. “The music industry has been so into selling albums to teens since the 1990s that they lost the customers over 30,” said Park Jun-heum, chief editor of the online pop music magazine Gaseum. “Then, when the teens turned away from albums in favor of other pastimes like computer games, the industry was left with no customers at all.”
Jo Seong-jin, of the pop music magazine Hot Music, also has little sympathy. “As the era of the LP ebbed away, that of the CD is about to go away,” he said. “The only ones who are not aware of this wind of change, however, seem to be music industry people, who cling to album sales.”
But it’s hard to put all the blame on music industry insiders. Outside factors have arisen to threaten the industry ― notably, the online music sites where downloading a music file is as easy as clicking a mouse.
Limited public awareness of copyright laws may be contributing to this. A survey of 257 Internet users conducted by Korea Advanced Institute of Science and Technology professor Mun Song-cheon found that 92 percent had downloaded a music file, but only 33 percent thought that doing so was illegal. By comparison, 66 percent of Internet users surveyed in England, Germany, France and Denmark by the International Federation of the Phonographic Industry thought downloading music files was illegal.
Indeed, though Korea leads the world in high-speed Internet access, the government has yet to pass a law specifically barring unauthorized online music file sharing. The United States did so six years ago; Italy, just to cite another example, did so last May.
Into this anarchic world four years ago stepped Bugs Music, an online streaming audio site. Unlike downloads, streaming audio and video are not stored in users’ computers. In late August of this year, Bugs Music reached an agreement with the Korean Association of Phonograph Producers, under which the association provides music files and Bugs Music charges its users.
With this agreement, about 58,000 songs on the Bugs Music site were authorized by the copyright holders. But this was far from a perfect solution. Bugs Music has a total of 270,000 files, most of which have yet to be authorized; users can’t access the unauthorized ones. It’s little wonder that the site’s online bulletin board is crowded with users’ complaints.
It’s been four years since Bugs Music got started, and in that time it’s done much to change the way music is consumed in Korea. Before Bugs Music and similar Web sites, television and radio were the only places (other than the record stores themselves) where new music could be introduced.
Now access is easier, and Internet users have responded in large numbers. More than 14 million people are members of Bugs Music, which is equivalent to every single household in Korea. One element of its appeal is that the site has “oldies but goodies” available, whereas the album market mostly deals with new releases.
But it could also be argued that Bugs Music has perpetuated the notion that music should be available free of charge. Certainly the site is not solely responsible for the music market’s decline from over 400 billion won in annual sales to about 180 billion won, but there’s no question that it played a role.
Bugs Music’s major sin, in the eyes of the music industry, was that it provided music without getting the permission of the copyright holders. Last year, the Culture Ministry settled a dispute between the record industry and the music sites by making nine sites charge their users. Bugs Music at first wouldn’t do so, but finally went along with it this summer.
The situation is worsened by an array of civil and penal lawsuits filed by major music companies.
Bugs Music now has a deal with the Korean Association of Phonograph Producers, but that group consists only of small and medium-sized companies. Big companies like Warner Music Korea, Sony Music Korea, SM Entertainment, Yedang Entertainment and YBM Seoul Records are still at odds with Bugs Music.
Those major agencies are now in direct competion with the site, in that they run music sites of their own.
Bugs Music’s response has been to keep the companies’ files online but deny access to them. The message users then receive, telling them that the music company has denied access, would appear to direct users’ antagonism against the companies.
In the midst of this dispute, a group of Web sites that charge for music files have appeared. But such sites aren’t a cure-all, because none of them can offer all the music Korean customers want.
MaxMP3, which has about 100,000 members, can’t provide music owned by Yedang Entertainment, YBM Seoul Records or SM Entertainment, companies with which the site still has ongoing legal disputes. Even at I Like Pop, a fee-based site affiliated with SM Entertainment, not all pop songs are available, since the site is not sharing any of the music with other sites.
“Our member companies only provide music to Web sites or companies that provide their music to us as well. Yedang and SM Entertainment insist on monopolizing their music,” said an official of the Korea Music Copyright Association. Consequently, people who want to download music legally have to be a member of more than one site to get all the music they want.
If users can’t find all the music they want even after paying money, it seems natural that they would try to get it an older way: the P2P (peer-to-peer) file sharing system, which allows individuals to share files.
Through such systems (Soribada2 and E-donkey are famous P2P systems in Korea), users don’t have to go through a main server; they connect directly with other members and share files with them. A court recently said that the maker of the Soribada2 program couldn’t be punished under current copyright laws.
Other, slightly different types of music providers are also available. Imeps is an online music provider whose service is in a form that in some ways is similar to Bugs Music’s, and in other ways similar to that of Soribada2. Such providers (Music Lamp is another) are difficult to define as legal or illegal, not just for users but for the courts.
Some artists and producers in the music industry argue that revision of the copyright laws is urgently needed, because free access to MP3 files is destroying the profit potential in the music business. They add that free MP3 access is also discouraging artists’ motivation to create good music.
At the moment, copyright law indicates that a person can download MP3 files for free as long as it is for limited, non-profit reasons, such as personal use. If private service providers on the Internet insist that they are doing it not to make a profit, but for personal use, it’s hard to find a legal reason to stop them.
In an effort to protect the artists’ copyrights, the Korea Music Copyright Association is trying to introduce a compensation system under which copyright holders can get some revenue from the sale of MP3 players. Such systems are in operation in 25 countries, including in Europe. In the United States, 2 percent of the sales price of MP3 players and cell phones with MP3 capacity is reserved for copyright holders.
“The revision should also include a measure for getting compensation fees from free MP3 providers on the Internet,” said Seong Gi-wan, a music critic.
The situation seems to be getting worse for the music industry as cell phones with MP3 capacity become more popular. Users can download MP3s for free through the phones’ Internet service. Cell phone companies are predicting that 5 million people will have MP3 phones next year.
“I could sell 3 million copies in the past when there was no free MP3 service on the Internet,” said singer Kim Gun-mo. “But for my new album, I don’t expect such big numbers at all.”


Background music for Web users

The Internet, the target of so many complaints from the music industry, has spawned at least one unlikely niche for money-making in music.
Sales of music files for background music for personal Web pages are generating considerable profits.
Users listen to songs while they are decorating their mini homepages or enjoying online games. Music sales at 13 Web sites, including Cyworld, Damoim, Naver and Netmarble, increased from 1 billion won in January to 2.4 billion won in August. Those companies have contracts with Musiccity Inc., a background music provider.
At Cyworld, which is famous for offering mini homepages to its users, subscribers are equipping their pages with songs that express their tastes.
“I feel good when good music comes out from my mini homepage,” said Ko Eun-joo, 24, an office worker who uses Cyworld. “I frequently shop for new background songs for a change. I do other stuff on the computer while I have my homepage up on the screen to listen to music.”
So far, Ms. Ko has purchased 220 songs.

by Lee Kyong-hee
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